Sport Revenue

The athletic department is considering replacing the scoreboard at the football stadium. It will cost $2.4M to purchase and install the scoreboard. The scoreboard will have an expected useful life of 15 years and is depreciated using the straight line method. At T=15, the scoreboard will have a salvage value of $100,000, and the current scoreboard has a salvage value of $20,000. The new board is expected to generate an additional 5,000 fans per season at an average ticket price of $20. The athletic department will also be able to sell additional advertising totaling $200,000 per season. However, the electric cost for the new board will be $55,000, compared to current usage of $5,000. The university feels that alternate projects could return 8%. The university also pays no taxes.